(AAP)

Low interest rates have given personal borrowing the biggest rise in six months as consumers take advantage of lower interest rates to refinance existing loans.

Economists say however that the threat of rising unemployment is likely to cap any further increase in personal loans in coming months.

Personal finance commitments rose by a seasonaly adjusted 4.1 per cent in December to $6.361 billion, Australian Bureau of Statistics (ABS) data has showed. 

The gain represents the biggest since June 2008 and the first monthly increase in personal loans since September.

CommSec chief economist Craig James said a big jump in loan refinancing was largely behind the recovery in personal borrowing in December.

“People are taking advantage of the lower interest rates to refinance old loans”, he said.

“It shows households are being very, very smart in this environment.”

Personal borrowing in December was 13 per cent weaker compared with the final month of 2007.

Nomura chief economist Stephen Roberts said the threat of rising unemployment would limit the rise in personal borrowing levels during 2009.

“It would be highly unlikely `other personal loans’ would pick up consistently over coming months”, he said.

“There’s the risk you’ll lose your job and not meet your repayments: it’s as simple as that.”

Personal loan interest rates are still in double digits even after the Reserve Bank of Australia eased monetary policy again in December, by a full percentage point, to take the cash rate to a then six and a half year low of 4.25 per cent.

The ABS data showed commercial loans rose 1.8 per cent in the month of December, but was down by an annual pace of 35.7 per cent.

“What businesses are doing is they’re making good use of their existing credit limits”, Mr James said.

Mr James said business borrowing had declined from an historic peak at the end of 2007, when the Australian share market had reached an all-time high.

The ABS data also showed a 7.1 per cent jump in home borrowing, the third consecutive monthly increase.

New buyers returned to the housing market in late 2008 after the federal government doubled the first home buyer subsidy for established dwellings to $14,000, and tripled it for new housing to $21,000.

The ABS lending data was compiled before the most recent rate cut in February that took the cash rate to a 45-year low of 3.25 per cent.